Note: There are two parts to this learning team assignment; Part 2 will be completed in Week 5.
Review the Learning Team Assignment due in Week 5.
Identify sources of information about cash management strategies and preparation of cash budgets to be used in the Precision Machines analysis due in Week 5.
Develop a 700-word annotated bibliography using at least 3 resources.
Format your bibliography consistent with APA guidelines.
Click the Assignment Files tab to submit your assignment.
Read the following case study:
Precision Machines is preparing a financial plan for the next six months to determine the financial needs of the company. The historical analysis of the company’s sales shows that the company’s total sales are 30% cash sales and 70% credit sales. Further analysis of credit sales shows that the company receives 50% of the credit sales one month after the sale and the remaining 50% in the second month after the sale. This means the cash collections from sales are 30% in the first month of the sale, 35% in the second month, and 35% in the third month.
The materials purchased by the company amounts to 50% of the sales for the month. The company pays for the purchases one month after the initial purchase. The company likes to maintain a cash balance of $5,000. The cost of borrowing is 10%. The company plans to pay off the loan whenever there is a surplus and borrow when there is a deficit.
The attached spreadsheet shows revenues (sales), expenses, capital expenditures, and other expenses for Precision Machines’ next six months. Using the information given above and contained in the spreadsheet, prepare a cash budget for January through June and determine the cash surplus, deficit, and the financing needs of the company. In the Recommendations section of the spreadsheet, insert your recommendation of a cash management strategy for the company that will minimize the financing cost and increase the cash flows for the company. Additionally,identify two economic and market forces that may impact the financial plan for this company.